The specialty alcohol and other drug abuse treatment system grew enormously in the 1970s and 1980s. In the l99Os, however, this system was under considerable fiscal pressure. A prolonged national economic recession followed by a tepid recovery has reduced the financial resources of governments, private employers, and individuals, while increasing the demand for public and private services to those in need. Spiraling medical care expenditures have led purchasers of treatment services to attempt to limit their outlays and emphasize cost-effective and managed care. The major goals of the proposed research are (1) to study the effects of the increasingly constrained fiscal environment on the alcohol and other drug abuse specialty treatment system; (2) to study variations in and the evolution of state treatment systems as a baseline for national health care reform, which will likely give the states considerable latitude in designing their health care systems. This research will extend the investigators' studies of the growth of the specialty treatment system in the l98Os. National trends in clients, capacity, funding, and staffing will be analyzed, but much of the analysis will focus on state treatment systems. Developments in both the public and private sectors will be studied. The primary methodology will be descriptive and econometric analysis of data from the 1979-1993 National Drug and Alcohol Treatment Unit (NDATUS) surveys of treatment units, and the 1985-1993 State Alcohol and Drug Abuse Profile (SADAP) surveys of state alcohol/drug agencies. The NDATUS will be adjusted for survey and item nonresponse, and to ensure comparability across years. We will produce the best available estimates of substance abuse treatment expenditures by state, a necessary input into the global health spending budgets envisioned under the Clinton administration's reform proposal. Secondary data analysis will be supplemented by development of theoretical/institutional economic models of state funding for substance abuse programs and behavior of substance abuse treatment units. In addition, case studies of the treatment systems in New York, California, Texas, and Illinois, and interviews with public officials, providers, corporate benefit managers, and insurers are proposed.